"It's an extraordinary set of circumstances. I've never seen this before in Victoria. It's unwarranted. It's been a good project and I don't understand why it would happen," he said.

Workers at the desalination plant were sent home on full pay this morning while the project's joint venture company, Thiess Degremont, investigates the allegations and conducts discussions with unions.

Newspaper reports this morning claimed a spying operation, code-named Pluto, was led by Tasmanian Bruce Townsend and his company Australian Security Investigations [ASI].

It's alleged that Mr Townsend and his security staff were engaged to spy on union members and provide intelligence reports on union activity at the site.

"He put a number of his people into the project... to infiltrate the networks there, to provide intelligence on what union members, delegates, and contractors were up to. What the industrial strategy would be, whether there were deliberate plans to slow the project down and how that could be countered."

Thiess has confirmed ASI worked at the site between March and June this year, but it says senior managers and the State Government were not involved in the decision to hire the operatives.

"The use of this consultant was totally inappropriate and contrary to Thiess's business practice," Thiess Australian operations chief executive Nev Power said.

"While the investigation has so far found no evidence of privacy breaches, we will continue to investigate to determine what action should be taken."

This is the first time work has stopped on the desalination project, where workers have enjoyed high pay rates and allowances.

Bill Oliver, Victorian Secretary of the Construction, Forestry, Mining and Energy Union [CFMEU] said his union will be demanding full disclosure from the company.

"Well be asking the state government for a full investigation," he said.

"We'll be demanding that we see all correspondence between Thiess and the strike breaking company from Tasmania. We'll be demanding the names of the personnel or the spies who were working on the site and we'll be calling for the immediate sacking of the Theiss management who employed these people."

Australian Building and Construction Commission [ABCC] Commissioner, Leigh Johns, has expressed concerns about the claims of covert monitoring at the plant.

He confirmed that the ABCC is examining the allegations.

'The ABCC has commenced enquiries to see if there has been a breach of workplace rights at the Wonthaggi Desalination plant under the general protections of the Fair Work Act 2009', he said.

Mr Mighell said any surveillance collected on his members must be destroyed.

"Obviously the concern we have with the reports is the surveillance. I want to know what form that took... Did it involve their private lives? Why was it done? Who instigated it? There are just so many questions."